CAPITAL ALLOCATORS – INSIDE THE INSTITUTIONAL INVESTMENT INDUSTRY
Episode: Adrian Meli – Active Equity Excellence at Eagle (EP.459)
Host: Ted Seides
Guest: Adrian Meli, Co-CIO, Eagle Capital Management
Date: September 15, 2025

Episode Overview

In this episode, Ted Seides delves into the investing journey and philosophies of Adrian Meli, Co-Chief Investment Officer at Eagle Capital Management. Spanning Adrian's personal roots, his early experiences in hedge funds, his rationale for moving to long-only investing, and Eagle’s approach to portfolio management and talent development, the interview offers a masterclass in adapting to—and thriving amid—evolving public equity markets. Listeners gain a front-row seat to how Eagle brings “hedge fund intensity” to a long-term, fundamental investing framework, builds competitive advantages in an increasingly efficient market, and identifies opportunities when the rest of the market has moved on.

Key Discussion Points & Insights

1. Adrian’s Early Passion and Formation as an Investor

[05:12–08:35]

• Adrian shares a formative upbringing rooted in “the thrill of the hunt,” reselling valuables and playing ruthless games of Monopoly with his family.
  • Quote: “All the games we played growing up were Monopoly and Acquire. My dad was ruthless. If you didn’t make a trade with him, the next round he would raise the price $100.” [07:11 – A]
• Early arbitrage opportunities; e.g., buying and reselling Garfield folders as a child, trading tchotchkes for classmates’ parents’ jewelry.
• Chose Williams College by emulating a smart peer, majoring in econ/psych with a strong interest in behavioral finance.
• Joined an investment partnership post-college in 2002, where he was attracted by finding “a way to make money without taking much risk.”

2. Hedge Fund Beginnings and Market Alpha

[08:35–12:23]

• “Drinking from a firehose:” entering hedge funds in 2002 presented an “enormous alpha pool” across asset classes (distressed debt, domestic and international equities, spinoffs).
• Tenacity in tracking great investors, learning from past 13Fs to understand decision making.
  • Quote: “You had a lot of aggressive smart people in an unconstrained structure, in a huge alpha pool... [That’s] why a lot of the best hedge fund returns in history were created from the late 90s to 2010.” [09:34 – A]
• Shift observed over the decade: as alpha becomes crowded by capital inflows and higher fees, net return opportunities shrink.

3. Seeing Around Corners: Transition to Long-Only and Eagle

[12:23–15:20]

• Adrian recognized declining net returns in hedge funds due to capital flowing in at high fees.
• Opportunity at Eagle: bring hedge-fund-level talent and research intensity to long-only, lower-fee structure.
• Quote: “Most of the great ideas in life are both non consensus and right... wouldn’t it be interesting if Eagle were able to develop this reputation of hiring the same types of people and bring the same intensity or talent pool from the hedge fund world to this long only side at a lower fee structure?” [14:19 – A]
• Despite peer skepticism, the move proved non-consensus—and successful.

4. Bridging Hedge Fund Intensity and Long-Term Patience

[15:20–18:09]

• Eagle’s competitive advantage: duration, depth of research, and a high-talent team.
• Unique structural advantages:
  • 25–35 stock portfolio, 8 analysts, hold periods averaging 6+ years.
  • Each analyst aims to introduce only one name every year or two, allowing depth of research.

5. Building a Team and Right to Win

[18:09–23:48]

• Eagle’s partnership model: analysts are paid salary only, not bonuses, to foster long-term thinking and downplay short-term incentive bias.
  • Large average client relationships (10 years); significant personal investment by partners.
  • Quote: “It's all built around an investment partnership... We all eat the cooking together.” [18:44 – A]
• Durable client base, compounder-business focus, intense debate and learning culture.
• Management access benefits: Eagle’s longer duration attracts management attention and access, an edge as many allocators shorten their horizons.

6. Analyst Compensation - Rationale for Salary-Only Approach

[23:48–25:47]

• Avoiding acute, annual bonus anxiety; aligns analysts’ focus on long-term outcomes.
• Attracts talent from hedge funds by offering meaningful partnership/career progression instead of just short-term bonus upside.
  • Quote: “There's no proof that this is the right way to do it. It's just the way we've done it.” [24:32 – A]

7. Opportunity Sourcing: From Broad Mandate to Focused Equity

[25:47–29:02]

• Despite a narrower remit, Adrian and Eagle see large-cap domestic equities as a return stream with low risk, ideal for client and personal capital compounding.
  • “Think of us as absolute return investors in a relative return world.”
• Dynamic adaptation: Portfolio oscillates between growth/value based on opportunity set; dismisses criticism that their record is simply a large-cap effect.
• Focus on identifying where capital is flowing in/out, which informs idea sourcing.
  • Quote: “To do what we do, we want to turn over the most amount of rocks possible to pick out these return streams.” [27:14 – A]
• Strong skepticism toward “factor bets,” preference for nuanced, differentiated streams.

8. Company Analysis – Navigating Different Earnings Streams

[30:04–33:06]

• When analyzing fast-growing tech or value businesses, Adrian’s approach:
  • Assess durability of moat.
  • Reluctance to overpay for optimism about growth, especially in today’s high-multiple markets.
  • Acknowledge unpredictability around new technologies like AI and the risk of overbuilt capex cycles.
  • Quote: “All companies die in the end. It's just a question of when.” [31:19 – A]

9. Deep Dive: Large Caps and “Non-Obvious” Alpha

[33:06–35:33]

• Not dispositionally a large-cap investor, but sees current large companies as the richest asset pool, especially given tech and globalization.
• Research process involves deep qualitative and quantitative work, including off-the-beaten-path interviews and scenario analyses.
• Focus on “What does the disruption look like in five or ten years?” for every prospective investment.

10. Generalist vs. Specialist: Team Framework

[35:47–36:24]

• Generalist approach with pragmatic specialization; analysts develop expertise in areas with apparent outliers.
  • Quote: “We want to be dangerous enough that we can notice outliers. And then... we want to spend an incredible amount of time doing deep research to make sure we're expert within that area.” [35:51 – A]

11. Market Inefficiencies and Active Management

[36:24–42:24]

• Contrary to consensus, Adrian argues that recent markets have actually become less efficient in certain pockets, not more.
  • Factors: short-term orientation of quant/multi-manager capital, shrinking horizon of active managers, overconcentration in indexes, and resulting valuation dispersion.
• Quote: “It looks to me like what's happening is the market is becoming a little more inefficient over the last five years in real time.” [40:13 – A]

12. Portfolio Examples: Uncertainty vs. Destination

[42:24–45:20]

• Adrian discusses highly out-of-favor sectors—SaaS, building products, homebuilders, HMOs—where the path is uncertain but the end-state profitability is promising.
  • Owns many “hard to hold” positions, but diverse enough that not all bets cluster together.

13. Decision-Making & Portfolio Construction

[45:20–47:12]

• While they assess expected IRRs, portfolio sizing factors in risk judgment—biggest positions are “ballast” names, smaller are hairier or entering/exiting.
• Prioritize diversity of return streams rather than just highest-IRR bets.

14. Experimenting with ETFs

[47:12–47:59]

• Eagle was early in launching an active ETF, meeting clients’ preference for liquidity and “click-to-buy” accessibility.
• “I think the reception has been much higher than I would have thought.” [47:45 – A]

15. Firm Outlook & Talent

[47:59–49:59]

• Core focus: Maintaining the firm’s excellence through relentless attention to talent, keeping the organization “the right size”—not driven by asset growth, but by performance and people.

16. Seeing Around Corners: Future Alpha Pools

[49:59–53:23]

• Skeptical of prospective equity index returns (S&P now “less interesting”), noting stretched valuations, concentration, and fiscal headwinds.
• Points to potential opportunities:
  • Asia (Japan, Korea), select VC, biotech, and long-only funds as passive and pod strategies crowd out active equity.
  • Predicts “merging” of public/private and long-only/hedge fund skill sets in coming years.

Notable Quotes & Memorable Moments

• On moving from hedge to long-only:
  “Wouldn’t it be interesting if over time Eagle were able to develop this reputation of hiring the same types of people and bring the same intensity or talent pool from the hedge fund world to this long only side at a lower fee structure?” [14:19 – A]

• On team and structure:
  "We all eat the cooking together. I'm heavily invested in the strategy. Alec’s heavily invested in the strategy. And we're compounding our own money along with clients." [18:44 – A]

• On analyst pay:
  "There's no proof that this is the right way to do it. It's just the way we've done it." [24:32 – A]

• On active management’s future:
  “I feel like the market's becoming a little less efficient in certain areas. And I'll explain it… It looks to me like what's happening is the market is becoming a little more inefficient over the last five years in real time.” [40:13 – A]

• On personal fulfillment:
  "My two passions in life are my family and business... but one thing I do have a passion for are rom coms. I’ll die on the Hill, that romantic comedies are criminally underrated." [53:31 – A]

• On gratitude:
  “It’s very unusual in life to be able to spend your lifetime at home and at work with people you love and admire. And for that I’m truly grateful.” [58:23 – A]

Important Timestamps

• [05:12] Adrian’s childhood, behavioral roots in value & arbitrage
• [08:39] Early hedge fund career, breadth of opportunity
• [12:23] Seeing industry shifts, motivation for structural change
• [15:27] Transition cultural differences between hedge funds and long-only
• [18:09] Eagle’s team and organizational advantages
• [23:48] Analyst compensation model (“salary only”)
• [25:47] Opportunity sourcing: from generalist to equity-focused investor
• [30:31] Analyzing free cash flow in fast-growing businesses
• [36:39] Market inefficiency and the current state of active management
• [42:32] Concrete examples of “hard to own” but asymmetric opportunities
• [45:30] Portfolio decision process and risk management
• [47:12] Rationale for Eagle’s active ETF
• [47:59] Talent and organizational development at Eagle
• [49:59] Outlook on where new return opportunities lurk
• [53:31] Personal favorites and philosophy
• [58:23] Reflections on life and fulfillment

Episode Takeaways

• Eagle’s success arises from patient capital, deep research, and a partnership culture—elements intentionally borrowed from hedge fund intensity but married to long-term investing.
• Active asset management is not dead, but requires dynamic adaptation: recognizing when inefficiency is creeping back and being prepared to act.
• Personal fulfillment in capital markets comes as much from working with inspiring people as from compounding capital.

Listen to this episode for a thoughtful case study in adapting investing edge to changing market structure, and for Adrian Meli’s irreverent, introspective take on both business and life.